Despite the rates, people are still taking out mortgages

Demand for home loans may be increasing in Greater Boston, despite mortgage rates rising above 7 percent for the first time this year. Leader Bank, a regional player based in Arlington, this month saw its highest number of loan applications in over a year — 43 percent higher than in the same period last year. That’s surprising, in a way. Yes, seasonality is a factor, as activity ticks up in the spring and summer. In Leader’s case, it might also be the fact that the bank has boosted its sales team from 52 to 64 loan officers. But the most significant driver might be the area’s supply-demand dynamic. “There’s such scarcity that the first thing that matters is finding a home you like,” said Jay Tuli, president of Leader Bank, which sells 90 percent of its home loans in Massachusetts. Home sales are down year-over-year due to the lack of inventory, said Theresa Hatton, chief executive of Massachusetts Association of Realtors. Many prospective buyers who were waiting for the Federal Reserve to begin cutting interest rates by now have reason to give up hope. Inflation isn’t coming down quickly enough and, at 3.5 percent, is still well above the Fed’s 2 percent target. So the central bank won’t trim short-term rates fast enough this year, contrary to what most economists had been expecting. Consequently, the 30-year fixed mortgage rate has risen to 7.1 percent, over 1 percentage point higher than this time last year and 0.6 percent more than January 2024, Freddie Mac reported last week. “Until inflation cools a bit, we can expect mortgage rates to remain elevated,” said Michael Debronzo, a regional sales executive at PNC Bank, which has noted a slight uptick in loan applications. — SUCHITA NAYAR